Black Monday, the 1987 market crash, led to the creation of circuit breakers on U.S. exchanges. The October 19 plunge showed that automated selling and rapidly changing prices could overwhelm market infrastructure, prompting regulators to seek a controlled way to pause trading during extreme declines.
The Brady Commission, formally the Presidential Task Force on Market Mechanisms, examined the crash and recommended coordinated safeguards. U.S. exchanges introduced market-wide trading halts in 1988. These mechanisms were designed to give investors time to assess information and reduce panic, rather than guarantee that prices would recover.
Modern circuit breakers operate under rules based on percentage declines in major indexes and may pause trading at specified levels. They are distinct from single-stock limit-up/limit-down controls, which address unusual moves in individual securities. Black Monday is also distinct from the 2010 Flash Crash: both involved electronic trading, but the 1987 event was a broader one-day market collapse with lasting structural consequences.